tv Nightly Business Report PBS August 15, 2012 7:00pm-7:30pm PDT
>> this is n.b.r. >> susie: good evening, i'm susie gharib. tom is off tonight. bullish news from tech belwether cisco systems: better than expected quarterly earnings, a big dividend hike, and the stock rallies in after hours trading. consumer prices hold steady, with little inflation in july, we look at what could change that picture. then, on the road again, with america's school children heading back-to-school, we look at the big business of busing. that and more tonight on "n.b.r."! >> susie: inflation remains a "no-show" for the u.s. economy. despite escalating concerns about the effects of the drought, retail prices barely budged in july. for the second straight month, the consumer price index was unchanged. core c.p.i., which takes out food and energy costs, edged up
only 0.10%, the smallest increase since february. suzanne pratt takes a look at whether inflation is a likely to remain tame. >> reporter: at this fruit and vegetable market in new york city, prices this summer have been pretty stable. little evidence of the drought that's been destroying crops in the midwest, and virtually no sign of inflation. thanks to a wet, hot summer on the east coast, local produce is plentiful, which helps explain the limited drought effect here. on top of that, businesses are reluctant to pass higher costs on to customers. >> if you change prices drastically then people won't come back in. we try not to make the world problems, like drought or weather try not to effect our prices as it would like a big company because we feed the neighborhood. >> reporter: but, perhaps more surprising is the lack of price pressure throughout the economy, despite all the money the federal reserve keeps pumping
in. >> it's put a lot of liquidity into the banks but that liquidity has stayed in the banks and hasn't gotten out to the public. and, as long as the banks sit on excess reserves, it's like that liquidity didn't go anywhere. so, it's like it hasn't been created. >> reporter: in the 12 months through july, the consumer price index, which measures retail inflation, has risen only 1.4%. remove energy and food, and the core rate is up 2.1%, the smallest gain since october. the question is whether prices can remain in check, for the foreseeable future, even if the fed launches another stimulus plan. the answer appears to be yes, at least for now. >> we think we're going to be in a subdued inflation environment for now. we think longer term over the next ten to 15 years it will probably average about 3%, you know we're well under that right now. but, we don't think we're in the type of environment where we're going to see very high
inflation. >> reporter: of course, the drought could lift food prices in the coming months. but, the impact on overall inflation might be modest, as food accounts for only 14% of the consumer price index. suzanne pratt, "n.b.r.," new york. >> susie: stocks bobbed between small gains and losses, as investors factored in those inflation numbers, and a mixed bag of other economic data. a key manufacturing report from new york state was weaker than expected, but from the housing sector, the homebuilder confidence index hit its highest level in five years. investors and traders are looking for clues on whether the federal reserve will move to stimulate the economy. we'll talk more about that with michael farr in just a few moments. by the closing bell, the dow lost eight points, the nasdaq rose 14, and the s&p added one point. >> susie: but the tone of trading could turn more positive tomorrow.
shares of cisco systems surged more than 4%, after the market close today, on strong quarterly earnings, and a dividend hike. the company boosted its dividend by 75% to $0.14 a share. the maker of computer networking gear also posted earnings and revenues that came in better than expected. it earned $0.47 a share, $0.02 more than estimates, and 17% higher than a year ago. sales rose 4.5% to $11.7 billion. >> susie: still ahead, cisco c.e.o. john chambers joins us, right after the company's earnings call. some of the nation's biggest retailers want to make shopping so easy, you can leave your wallet at home. walmart, target, and 7-eleven are among the retailers teaming up to build a new mobile payment network. it would let people pay with their smart phones. the system, known as "merchant customer exchange" is being designed to compete with
services like "google wallet." with mobile payments expected to top $1 trillion in the next five years, target says the goal is building a, "broad, seamless experience across all retail formats." and some analysts believe this marks the beginning of the end for the old-fashioned billfold. >> susie: and other retailers are breaking into this field. month starbucks is developing a payment system for its coffee shops, and ebay's paypal unit has a deal with more than a dozen retailers to do the same. there's still no word on when the systems will be available in stores.
>> susie: wil,awbwáijujn that's the big question hanging federal reserve policymakers will pump more money into the economy, what everyone calls "qe3." joining us now, michael farr, president of his own firm, farr, miller and washington, and author of "the arrogance cycle". so michael, will they or won't they? what do you think the fed is going to do? >> susie, i think they're going to sit pat. they're running out of time. they have three more meetings left this year. september, aungt and then december. october will be too late in front of the election. the economic data has been reasonably positive lately, kind of giving them a little
more pause. and then we have bernanke at the jackson hole conference at the end of august. somewhere in here, i expect them to extend that period of low interest rates into 2015 which is a big deal. but i don't expect anymore qe observe the election here. it could make it tough on bernanke's reappointment chances, but they're running out of time. >> susie: that's right. they are. talk blgts bit about the economic data, because we've been getting strong numbers. yesterday, strok retail sales. today for the housing sector, home builders feeling confident. we have weak data. when you add it up, i guess things aren't bad enough for the fed to do anything, and not good enough to see the economy growing, right? >> i think that's right. you know, the retail sales number had been of great concern, particularly those numbers in july, were very, very concerning on the retail
side, and the consumer spending. housing was a little better. nothing showing a great robust revery, but we're not grinding to any kind of a halt. the fed is trying to take a wait is it see approach, and they supplied enormous liquidity to the markets. we have a 10 year treasury at one and a half to 1.6%. these rates are everywhere low, and one has to wornld how much more economic acts tiftd you're going to get if you take rates to one percent. is that going to change buying habits? >> it's difficult for investors to know what to do. investors have built up hopes the fetted is going to do something. let's go over the calendar you were talking about and walk through it again. we do have a big policy statement expected at the end of the month in august in jackson hole where bernanke is expected to say something, and then there's the september two day meeting. then late october, as you said
is the next meeting which politically doesn't look good right before the election, and then december. so when you look at the calendar and investors look at it, what does that mean for the direction of the market? just slow and steady until the end of the year? >> susie, we've been trading on the risk on risk off trade for a while. we trade on every utterance of the fed and central bankers around the world. investors are looking at data that really aren't all that fabulous, and yet stocks start to surge when it looks like the fed or a federal bank is going to do something. investors why a yearning for something magical. we want a silver bullet. we want the fetted to be able to fix all this, and i'm not sure they really can. caution, i think, is what i would certainly advise investors. make sure you own companys with strong balance sheet that is can weather storms. i think you also have to be prepareed to sit back and keep
your powder dry and your cool head about you. it's a risky to take all, and you feel like you're missing out. stay calm and own companies with good dif denlds and look for the long term. this is a dicey recovery. we're going to get through but be cautious. >> susie: good advice. thank you, michael farr of farr, miller & washington. >> thanks, susie. >> susie: over the next few weeks children across the country will be heading back to school, and many of them will get there on those iconic yellow buses.
here in the u.s. about 24 million kids ride school buses every day. but as ruben ramirez reports the economics of getting kids to and from school may be shifting as cities struggle with tighter budgets. >> reporter: it's a scene that you'll start seeing more and more as kids across the country head back to school. about two-thirds of school districts around the country operate their own bus systems. but as school districts struggle to raise revenue more and more of them are outsourcing bussing, a so-called non-core services. >> if a school district wants to raise money, they have to raise taxes, so we can look at this from a different perspective. we can go in, we can make investments in communities, we can literally buy the fleets and put teachers back into the classrooms, put programs back. >> reporter: that's student transportation c.e.o. denis gallagher, he started the company 15 years ago. today, the business operates in 16
states and canada, transporting about 600,000 kids a day. he's grown the business through acquisitions, buying up about nearly 40 mom-and-pop operations. three years ago he bought out jordan transportation. art jordan started the business in 1957 with four school buses. his son mark still runs jordan for s.t.i. >> they're able to bring a lot of different things. purchasing power. a lot of extra logistics that we didn't have the benefit of. they're really is a beautiful blend between the family run branding name that happens on the local level, but we're also able to have a lot of things that come with a larger corporate structure. >> reporter: nationwide, the average age of a school bus is ten years old, those owned by s.t.i., are about half that age. tell me about some other technology that you have that's not in this bus, but you have in other parts of the country where parents can actually know where there kids are all the time? >> we have a product called
"safe stop" and safe stop is through a g.p.s. system, i think very importantly it tells working moms and working dads when the bus got to school at 8:02. the bus picked up johnny at 8:10. the bus dropped johnny off at their bus stop at 3:05. >> reporter: s.t.i. is looking to expand into the carolinas and california. but there is growing competition for bus service contracts from companies in europe and private equity firms looking to cash in on long-term revenue streams from the contracts. they can run as long as ten years. retail investors have been big fans of the shares which typically pay out a $0.56 a share annual dividend. >> we've got growth opportunities. we're a rare case of being a growth company that pays a dividend. >> reporter: while s.t.i. may not always come in with the lowest cost bid for school districts, gallagher says qualified mechanics, dispatchers and bus drivers are important for parents who put their children on the bus every morning. ruben ramirez, "n.b.r.," butler, new jersey.
>> susie: stocks managed to eke out a small gain today, despite mixed economic data, and a mixed bag of earnings reports. the dow only traded in a 55 point range, the second smallest trading range of the year. the s&p see-sawed most of the day in light volume. although the index rose only a point, it's still hovering near a four year high. consumer discretionary and financial stocks lead the pack today, while utilities were the biggest losers. staples was the biggest decliner today in the s&p, after it reported a huge 32% drop in profits. the company is experiencing an unexpected downturn in its north american stores, and continued weakness abroad. if that wasn't bad news enough, staples also lowered its full year earnings guidance, pushing the stock to a nine-year low. that dismal outlook from staples pressured rivals office depot and office max. both fell 3%. but it was a great day for investors in teen retailer abercrombie and fitch: the biggest gainer in the s&p.
the stock rose 9%, after the company reported earnings that were slightly better than expected. but what really helped the stock was word from the c.e.o. that its business is stabilizing, after a rough start to year. target shares also rose today, on better than expected earnings of $1.06 a share. the company says it's winning over shoppers with a bigger selection of food, as well as, deeper discounts. target lifted its full year forecast, and that lifted the shares more than a dollar to $64 and change. also reporting earnings today: deere, and it wasn't a pretty picture. profits came in $0.33 below expectations. it didn't matter that revenues came in slightly ahead of forecast. the world's largest farm equipment maker cut its full- year outlook due to weak sales in china and india. but, there was something that analysts also found troubling: >> the thing that surprised me first off is the fact that they had manufacturing execution issues.
i just always think of deere as being an excellently run company, so you don't really expect to hear something like that from them. >> reporter: deere shares lost 6% today. rival caterpillar fell, but not as much, because it reached a tentative agreement with striking workers at a plant in illinois. shares of j.d.s. uniphase saw a nice pop today, after yesterday's surprisingly upbeat earnings forecast. the company says demand for its optical networking components is strong. j.d.s. uniphase stock closed up 8% today to $11.56, rebounding from a 2.5 year low set last month. and finally, among the most actively traded e.t.f.'s today, all on the upside, except for the ishares emerging market index fund. and that's tonight's "market focus."
>> john chambers. it's so nice to see you. congratulations on the strong numbers. >> thank you, susie. it's good to k back on your show, and nice to be reporting good numbers. >> susie: yes, you do have good numbers. and that big dif denld hike was a positive message thaw sent out to everyone. but you also told analysts today thatd global economy is presenting challenges for cisco. how would you describe the overall market around the world for tech spenldying?
>> it's in three parts. europe is a tough challenge, and it's tough before better. and asia pacific is better than most people would say. it grew 12% for us the last quarter year over year, and pretty good balance across china growing 17%. korea, japan, aus ausall doing well. in terms of the u.s., it's the first positive signs we've seen. too early to call a trenld. but enterprise spenlding turning up. and commercial turning. state and local government which is the first one to slow down 18 months ago start to turn up as well. federal government will continue to go down in terms of spenlding. the trenld is going the right way. asia pacific solid, and europe challenging. >> susie: europe not a surprise. you've been getting a lot of concerning news about all the countries in the euro zone. let's talk about as a. we got a lot of reports about the
chinese economy slowing down, and same for japan. your business seems to be doing well. do you see that continuing over the next 12 months? >> well, i'd say there's two different scenarios between china and japan. we are tightly alineed in terms of the business opportunities there, and we have a great team in japan. even during the economic downturn they grew double digits. and there, you're sharing about share of market, and many customers and service providers with large enterprise. in china we grew 17% the last quarter. the business there is a little lumpy, but we're doing well in terms of our overall positioning. so my view on china, you never bet against china. i've been doing business there 25 years, and i think we're very well positioned to be successful in china. think of it, susie, not as selling roulters and switching, much like a plummer, which is how we made our team, and plummer i plumber
but rable profession, like with the olympics, we were the infrastructure sponsor there. and we helped successful olympics, and houp do you help inclusion within a country. we helped pull off the olympics with the committee, and did with nbc broadcast what would amailz you, one of the best sound bites is he broadcast with nbc top 4.2 billion people, and it was equiv lenlt of 24 by 7 for seven and a half months on six individual tv channels. it changes every day, susie. >> susie: you gave an update assessment of the the u.s. what are ceos and the chief technology officers following you about actually puting in new orders for the new year coming up for you? >> susie, comments about the u.s., saying it's the first time we've seen x*inltications of an upturn.
i'd like to see that for another quarter before i call it a trend. the ceos are saying the business as a whole is good. they're am am saying the u.s. economy is one and a half to two percent growth. it isn't enough to get back to work, but it isn't a disaster. they need consistency, and they're hesitant about spending. they just need mlgts more predictability. our share seems to be going up, and we're doing well in terms of earning trust and confidence. >> susie: everything you're saying looks upbeat looking ahead, and you're siting on $50 billion cash. is business good enough that you'll be adding to the payroll and hiring more people? >> susie, i'm an american company and prefer to have the majority of my head count in the u.s. like we do today. we're probably the last of the big high-tech company that is have been around for 25 years that have the majority of their head count here.
i want to continue to do that. our country has to change our tax policy. we are the only country nlt world that double taxes profits from around the world and doesn't bring it back at a nominal rate. if we were able to bring back 40 billion plus trapped overseas to the u.s., absolutely, we'd increase jobs, pay out dif denlds and acquire companies, and wherever you acquire, you grow. in uk they said if they won't let you bring it back, spenld is in the uk. we just spenlt $5 billion nlt uk, and hypered engineers. canada is a good place to do business. and we want to put america back to work. >> susie: i take it you're not going to be doing as much hiring in the u.s. do you see more acquisitions overseas? is that the message here? >> i prefer to acquire in the u.s. because there's more start-ups here, but i can only acquire where i have my money. if the majority of the money
is overseas you unfortunately aquierp overseas, and whether it's the prime minister of israel, they nld where i acquire i will grow. the same with france, uk and india. if we're not able to bring the finances back, we'll put the shareholders money to good use. u.s. is still the best place to invest if we can improve the tax rules. >> susie: thank you for coming on the program, and good luck to you. >> thank you, susie, it's a pleas tower see you again. look forward to be on the future. >> susie: same here. john chambers. ceo of cisco. >> reporter: i'm erika miller in southampton, new york. you think you know how ice is made? well tomorrow we'll take you behind the scenes at an ice company that make 225 tons of ice a day! >> susie: that's nightly business report for wednesday,
august 15. we want to remind you this is the time of year your public television station seeks your support. i'm susie gharib, good night everyone, we'll see you online at: www.nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org [ woman on radio, indistinct ] ♪ bum-bum
♪ bum-bum, bum-bum, bum-bum ♪ - ♪ ai, ai, ai - ♪ bum-bum - ♪ bum-bum, bum-bum - ♪ [ ice rattles rhythmically ] ♪ bum-bum, bum-bum, bum-bum ♪ ♪ [ imitates guitar noise ] ♪ [ vocalizing up-tempo heavy metal song ] ♪ [ vocalizing ontinues ] ♪ [ all singing ] the redesigned, 8-passenger pilot. smarter thinking. from honda.